By Dee Karawadra
Impact PaySystem
Something has been generating a buzz in the payments industry. Many people who are talking have not seen it, and very few have demoed it. Nevertheless, some believe it is an elixir that will replenish the income that equipment leases used to generate. But others think it is beyond the pale for merchant level salespeople (MLSs).
So, what is the buzz about? The POS system.
POS systems have been around for a while. But now more solutions are available for small to mid-size merchants. Even big names such as First Data Corp., HP and Microsoft Corp. are teaming up to put together their version of a POS system that will be distributed through First Data channels.
Their product was launched in March and is available to First Data's independent agent and ISO channels, according to Barry McCarthy of First Data Commercial Services.
Prominent ISOs like United Bank Card Inc. and Orion Payment Systems are also on the bandwagon.
So, why would companies such as First Data and UBC jump into the POS market? Will POS systems really bring profits back to hardware placement? Are MLSs finally fed up with low margins, free equipment and outrageous merchant attrition?
One reason the POS system's time appears to have come is that Microsoft is in the game. Most people who use computers use Microsoft's Excel, Word and Outlook applications routinely. Thus, Microsoft's Retail Management System (RMS) software will be instantly familiar to them.
Also, MLSs hope selling and leasing POS systems will reinvigorate revenue streams on equipment, which have been running dry due to the over-saturation of free terminal programs.
ISOs have been looking into alternative revenue generators for MLSs. In order to survive the "freebies," we ISOs and MLSs have to find niches. POS systems open the door to one such niche.
POS systems accommodate more than just payment processing _ for a price comparable to what a wireless terminal used to cost. This has created an opportunity for MLSs to provide an integrated solution for small to mid-sized merchants. What used to be cost prohibitive to smaller merchants is now becoming very affordable.
Merchants spend from a few hundred dollars to a couple thousand dollars for a cash register system. A credit card terminal will run them another few hundred dollars; a back-office computer may cost $1,000; and accounting software will add another $300.
Before realizing it, merchants can easily spend over $5,000 on equipment. So why wouldn't they be interested in an integrated solution that takes care of the payment processing, accounting, inventory, back-office operations, sales tracking, customer management and much more – for less money?
Merchants get a one-stop shop for all their POS needs. This creates value. And offering a product that merchants value promotes loyalty.
In addition, the POS system has not saturated the small to mid-size merchant market. Few products are even in the game as yet, and their availability is still somewhat limited. Because of this, the margins are attractive.
This industry has been exposed to a slew of promotions. From free equipment to zero transaction and statement fees, the margins are shrinking. This has created a price war to the bottom.
POS systems can bring back the hope of gaining margins by selling packaged value instead of price. Premier-consultant, a member of the GS Online MLS Forum, pointed out, "If you sell with solutions, you'll always be able to price justify with ROI."
MLSs who offer POS systems may no longer have to worry about the corner boutique down the street with a low credit card processing volume and pass-through plus $0.05 pricing. With the POS system, MLSs are selling a complete package. They are essentially saving the merchant time and money by providing a packaged solution.
Leasing could accommodate the needs of merchants for whom purchasing POS systems is not workable. Jared Isaacman of UBC posted on the MLS Forum, "Some merchants see value in leasing an ATM for $139/month because it brings value to their business. Would merchants lease a high-end POS system? Sure."
Offering POS systems also gives new MLSs an opportunity to earn a living while building a residual base.
MLSs will also have better leasing options than those offered through traditional credit card industry leasing companies. Now MLSs will be able to offer financing through companies such as General Electric Capital Corp. And First Data is offering leasing options through First Data Leasing Services.
In addition, First Data said its HP-branded POS product will come with a three-year limited warranty on hardware, labor and on-site service.
I speak to agents daily, and they express their frustrations with "free" equipment and cut-rate pricing on processing. This type of competition forces MLSs to focus on lowering merchant attrition.
The POS system brings merit to the sales process. No longer will MLSs have to sell the same widgets their competitors are giving away. Instead, they will be able to bring true value to merchants, providing a product that is unique and not easily replaced.
The temptation to switch processors to save a few pennies, once so easily done, will now come with repercussions, making a change in processors more thorny than rosy.
Merchants will think twice before deciding a new offer is worth the trouble. A transition could damage a merchant's entire business system.
Many MLSs may not even be able to reprogram a given POS system unless they are processing through a company that is certified on that system. This will eliminate many rivals before they even get to the sales pitch stage.
The POS system opportunity will have to overcome many hurdles before MLSs embrace it. The most important factors will be support, leasing options and a credible retail solution.
MLS Forum member ccguy said a "real winner for the MLS would be if a POS company came out with a retail package, provid[ing] 24-7 customer service help desk. ... It would have to be affordable, easy to train the merchant on ... and [offer] a way to lease it without having to lay out cash for the MLS."
The difficulty will be coordinating all aspects _ from hardware manufacturing to software development, system installation to training. All will play a major roll in getting the POS system to the MLS market.
Once these obstacles are overcome, the snowball should roll down the mountain and gain momentum. Ccguy noted that at this point you will have a product MLSs can sell or lease to make money and gain merchant retention.
When asked about software support, Barry McCarthy of First Data said, "Help desk services will be provided by First Data.
"Additionally, every implementation of Microsoft Dynamics Point of Sale 2.0 includes free unlimited technical support and access to other valuable support resources from now through June 30, 2007."
First Data may have the right ingredients. But the cost of leasing or purchasing the company's POS system combined with the limited support available will inhibit ISOs and MLSs from diving in.
One thing many posters on the MLS Forum emphasized was the need for support on the POS system as a whole.
Are retail POS systems the secret to successfully overcoming the blight of free terminals and meager transaction fees? I certainly hope so. Until next time, safari njema (Swahili phrase meaning safe journey). 
Dee Karawadra is the founder, Chief Executive Officer and President of Impact PaySystem, based in Memphis, Tenn. He and his team have a wealth of knowledge on the merchant services industry, with a niche in the petroleum market. Dee's experience on the street as an agent has guided him in laying a foundation for an agent program that is both straightforward and lucrative for his agents. Contact him at 877-251-0778 or dee@impactpaysystem.com.
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